Thailand economy: Technological readiness: struggling to get ahead

Thailand ranks 49th out of 82 countries in The Economist Intelligence Unit's Technological Readiness Ranking for 2018‑22. Within the Asia-Pacific region, Thailand has a middling position. It scores above average for the region in subcategories such as mobile-phone subscriptions, scope of e-government and the quality of its e-commerce business environment. However, it lags behind in terms of patent applications, research-and-development (R&D) investment and research institutions. The country will only gradually progress on this front as it implements its long-term Thailand 4.0 plans, meaning that it will not increase its advantage over other countries in the region.

The fundamental criterion for assessing technological readiness in our assessment is access to the internet. In this regard, Thailand has a middling rank: there were an estimated 37.1 internet users per 100 population in 2017, which is above the average for regional neighbours such as India (36.5) and Indonesia (27.7), but below that of Malaysia (81.2). We expect fast growth in internet subscribers and users by 2022, with the former forecast to reach 20.4m by the end of the forecast period, up from an estimated 10.4m in 2017. As a result, the internet user penetration rate will increase to 82.4 per 100 by 2022. This will be achieved in part by public investment in infrastructure: high-speed wireless internet access in public spaces will be boosted under the "Smart Thailand" initiative, which plans to establish nearly 400,000 free access points around the country.

As the digital economy expands, Thailand will experience significant changes in consumer behaviour patterns, including the increasing use of e-commerce and e-government facilities. Indeed, such trends have already been striking in the country. Thailand's e-commerce market is one of the fastest growing in South-east Asia, with approximately 12.1m online shoppers in 2017, according to eshopworld.com, an e-commerce technology provider. It expects the figure to rise to 13.9m by 2021. According to eMarketer, a research firm, in the second quarter of 2015 Thai consumers spent 155 minutes per day on smartphones, compared with 140 minutes in the Philippines and Indonesia. As at January 2017 90% of internet users accessed online content through their smartphones in Thailand. In addition, the government is also expanding its presence on the digital platform. In June 2017 the Ministry of Digital Economy and Society announced plans to create two new state broadband operators with the aim of boosting internet access. The new enterprises will be called the National Broadband Network Company and the Neutral Gateway and Data Centre Company and are expected to be operational by the end of November 2018.

Shallow infrastructure will get in the way

Despite being poised for rapid growth in its digital economy, Thailand's infrastructure remains wanting. Long-Term Evolution (LTE) network coverage, by which networks are future-proofed for later upgrades, is expanding quickly, but take-up of these services remains low. Only around 31% of all mobile subscriptions were 4G in 2016, according to GlobalData, a market research firm. A recent report by OpenSignal, a market intelligence company, covering October‑December 2017 shows that 4G availability (based on the proportion of time users have access to a network) reached 85.6%. However, the country was near the bottom of the 77 countries covered in terms of speed, at an average of just 9.6 Mbps. Low investment into R&D (representing only 0.6% of GDP in 2017) and the lack of adequate skill levels have also held back development in this area.

Overall, therefore, the outlook for Thailand's technological readiness is relatively subdued; a below-par performance for a country that is devoting much of its industrial policy efforts towards high-technology sectors. The risk of political instability emanating from the transition from a junta to a partially elected government, which is expected to take place in 2019, also means that investors will be wary about making new commitments in the early part of the forecast period. In the past political transitions have been difficult and destabilising to the business environment.

Nevertheless, we expect future governments to remain broadly faithful to the junta's 20-year National Strategy, which was first proposed in 2015. This military government's Thailand 4.0 strategy also fits within this—a sector-specific industrial policy that aims to attract new investment towards mechanisation, highly skilled labour and the digital economy. Such initiatives will eventually create a new line of investment opportunities in Thailand and pave the way for gradual progress in the country's technological readiness. However, we expect most of the benefits of this policy to come to fruition beyond our 2018‑22 forecast period.